Prior studies on executive compensation have primarily reported that CEOs adjust reported earnings to maximize their compensation levels, and have verified this using firm performance measures. Departing from such conventional approaches, this study empirically examined whether excess executive compensation plays a role in reducing upward and downward earnings management behavior in typical agency relationships. The sample comprised Korean listed companies from 2005 to 2007, and the level of excess compensation was estimated using compensation functions identified in prior research. Earnings management presence and magnitude were measured using discretionary accruals estimated by the modified Jones model and real earnings management proxies. The results revealed that as excess executive compensation increased, earnings management behavior significantly decreased. The negative relationship between excess executive compensation and earnings management implies that when executives are sufficiently compensated, risk-taking behavior such as earnings management can be reduced. Furthermore, excess executive compensation showed a negative relationship with downward earnings management when measured by real earnings management proxies, while it exhibited a negative relationship with upward earnings management when measured by discretionary accruals. These results indicate that executives strategically select their earnings management methods to maximize their private benefits. Given that adjusting reported earnings through real earnings management methods can impair firm value in the long run, excess executive compensation may rather have a positive effect on firm value from a long-term perspective. These findings provide counterevidence to the prevailing negative public perception of excess executive compensation, thereby offering meaningful implications for the determinants of executive compensation.